THE ALKALINE WATER COMPANY INC.
(Exact name of registrant as specified in its charter)

Nevada

99-0367049

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

7730 E Greenway Road, Suite 203, Scottsdale, AZ

85260

(Address of principal executive offices)

(Zip Code)

(480) 656-2423 (Registrants telephone number,
including area code)

Not Applicable (Former name, former address
and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).

Yes [X] No [ ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, smaller
reporting company, or an emerging growth company. See definitions of large
accelerated filer, accelerated filer, smaller reporting company, and
emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [ ]

Smaller reporting company [X]

(Do not check if a smaller reporting company)

Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act.Yes [ ] No [ ]

Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date.

19,763,739 shares of common stock issued
and outstanding as of August 21, 2017.

The accompanying notes are an integral part of these condensed
consolidated financial statements.

THE ALKALINE WATER COMPANY INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(unaudited)

For the Three Months Ended

June 30, 2017

June 30, 2016

Revenue

$

5,180,194

$

2,946,749

Cost of Goods Sold

2,951,944

1,790,713

Gross Profit

2,228,250

1,156,036

Operating expenses

Sales and
marketing expenses

1,670,017

1,085,999

General and administrative

2,090,392

840,774

Depreciation

96,279

89,439

Total operating
expenses

3,856,688

2,016,212

Total operating loss

(1,628,438

)

(860,176

)

Other income (expense)

Interest income

-

98

Interest expense

(123,649

)

(112,601

)

Amortization of debt discount
and accretion

(19,667

)

(45,258

)

Change in
derivative liability

-

4,306

Total other
income (expense)

(143,316

)

(153,455

)

Net loss

$

(1,771,754

)

$

(1,013,631

)

EARNINGS PER SHARE (Basic)

$

(0.10

)

$

(0.07

)

WEIGHTED AVERAGE SHARES OUTSTANDING (Basic)

17,967,618

14,716,285

The accompanying notes are an integral part of these condensed
consolidated financial statements.

THE ALKALINE WATER COMPANY INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

For the Three Months Ended

June 30, 2017

June 30, 2016

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss

$

(1,771,754

)

$

(1,013,631

)

Adjustments to reconcile net loss to net cash used in
operating

Depreciation
expense

96,279

89,439

Stock compensation expense

1,339,502

142,625

Amortization
of debt discount and accretion

19,667

79,049

Interest expense relating
to amortization of capital lease discount

25,752

25,752

Change in
derivative liabilities

-

(4,306

)

Changes in operating
assets and liabilities:

Accounts receivable

(864,345

)

(26,561

)

Inventory

(17,323

)

(74,492

)

Prepaid expenses and other current assets

22,162

206

Accounts
payable

11,322

(247,813

)

Accrued expenses

(7,394

)

35,953

NET CASH USED IN OPERATING
ACTIVITIES

(1,146,132

)

(993,779

)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of
fixed assets

(77,583

)

(49,310

)

Equipment Deposits -
related party

-

(67,619

)

CASH USED IN
INVESTING ACTIVITIES

(77,583

)

(116,929

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from notes
payable

-

260,000

Proceeds
from convertible note payable

500,000

-

Proceeds from revolving
financing

628,873

70,532

Proceeds
from sale of common stock, net

-

425,000

Repayment of notes payable

-

(341,863

)

Repayment of
capital lease

(67,136

)

(57,360

)

CASH PROVIDED BY FINANCING
ACTIVITIES

1,061,737

356,309

NET CHANGE IN CASH

(161,978

)

(754,399

)

CASH AT BEGINNING OF PERIOD

603,805

1,192,119

CASH AT END OF PERIOD

$

441,827

$

437,720

INTEREST PAID

$

83,960

$

19,162

The accompanying notes are an integral part of these condensed
consolidated financial statements.

2

THE ALKALINE WATER COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(unaudited)

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The consolidated financial statements included herein,
presented in accordance with United States generally accepted accounting
principles and stated in U.S. dollars, have been prepared by the Company,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. The interim financial statements are condensed and should be read in conjunction with the Company's
latest annual financial statements and that interim disclosures generally do not repeat those in the
annual statements.

These statements reflect all adjustments, consisting of normal
recurring adjustments, which in the opinion of management, are necessary for
fair presentation of the information contained therein.

All significant intercompany balances and transactions have
been eliminated. The Alkaline Water Company Inc. (a Nevada Corporation),
Alkaline Water Corp. (an Arizona Corporation) and Alkaline 88, LLC (an Arizona
Limited Liability Company) will be collectively referred herein to as the
Company. Any reference herein to The Alkaline Water Company Inc., the
Company, we, our or us is intended to mean The Alkaline Water Company
Inc., including the subsidiaries indicated above, unless otherwise indicated.

Reverse split

Effective December 30, 2015, the Company effected a fifty for
one reverse stock split of its authorized and issued and outstanding shares of
common stock. As a result, the authorized common stock has decreased from
1,125,000,000 shares of common stock, with a par value of $0.001 per share, to
22,500,000 shares of common stock, with a par value of $0.001 per share. All
shares and per share amounts have been retroactively restated to reflect such
split.

On January 21, 2016, stockholders of our company approved, by
written consents, an amendment to the articles of incorporation of our company
to increase the number of authorized shares of our common stock from 22,500,000
to 200,000,000.

The Company received written consents representing 20,776,000
votes from the holders of shares of its common stock and our Series A Preferred
Stock voting as a single class, representing approximately 61% of the voting
power of its outstanding common stock and its outstanding Series A Preferred
Stock voting as a single class as of the record date (January 12, 2016). On
January 21, 2016, there were no written consents received by the Company
representing a vote against, abstention or broker non-vote with respect to the
proposal.

3

Our authorized preferred stock was not affected by the reverse
stock split and continues to be 100,000,000 shares of preferred stock, with a
par value of $0.001 per share. In addition, the number of issued and outstanding
shares of Series A Preferred Stock continues to be 20,000,000. However, holders
of Series A Preferred Stock had 0.2 vote per share of Series A Preferred Stock,
instead of 10 votes per share of Series A Preferred Stock, as a result of the
reverse stock split.

On January 22, 2016, the Company amended the certificate of
designation for our Series A Preferred Stock by filing an amendment to
certificate of designation with the Secretary of State of the State of Nevada.
The Company amended the certificate of designation for our Series A Preferred
Stock by deleting Section 2.2 of the certificate of designation, which
proportionately increases or decreases the number of votes per share of Series A
Preferred Stock in the event of any dividend or other distribution on our common
stock payable in its common stock or a subdivision or consolidation of the
outstanding shares of its common stock. Accordingly, holders of Series A
Preferred Stock will have 10 votes per share of Series A Preferred Stock,
instead of 0.2 votes per share of Series A Preferred Stock.

On March 30, 2016, the Company designated 3,000,000 shares of
the authorized and unissued preferred stock of our company as Series C
Preferred Stock by filing a Certificate of Designation with the Secretary of
State of the State of Nevada. Each share of the Series C Preferred Stock will be
convertible, without the payment of any additional consideration by the holder
and at the option of the holder, into one fully paid and non-assessable share of
our common stock at any time after (i) the Company achieves consolidated revenue
equal to or greater than $15,000,000 in any 12 month period, ending on the last
day of any quarterly period of our fiscal year; or (ii) a Negotiated Trigger
Event, defined as an event upon which the Series C Preferred Stock will be
convertible as may be agreed by our company and the holder in writing from time
to time.

On May 3, 2017, we designated 3,000,000 shares of the
authorized and unissued preferred stock of our company as Series D Preferred
Stock by filing a Certificate of Designation with the Secretary of State of the
State of Nevada. Each share of the Series D Preferred Stock will be convertible,
without the payment of any additional consideration by the holder and at the
option of the holder, into one fully paid and non-assessable share of our common
stock at any time after (i) we achieve the consolidated revenue of our company
and all of its subsidiaries equal to or greater than $40,000,000 in any 12 month
period, ending on the last day of any quarterly period of our fiscal year; or
(ii) a Negotiated Trigger Event, defined as an event upon which the Series D
Preferred Stock will be convertible as may be agreed by our company and the
holder in writing from time to time.

Use of Estimates

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
significantly from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with an
original maturity of three months or less to be considered cash equivalents. The
carrying value of these investments approximates fair value. The Company had
$441,827 and $603,805 in cash and cash equivalents at June 30, 2017 and March
31, 2017, respectively.

4

Accounts Receivable and Allowance for Doubtful
Accounts

The Company generally does not require collateral, and the
majority of its trade receivables are unsecured. The carrying amount for
accounts receivable approximates fair value.

Accounts receivable consisted of the following as of June 30,
2017 and March 31, 2017:

June 30.

March 31,

2017

2017

Trade receivables

$

2,283,626

$

1,419,281

Less: Allowance for doubtful accounts

(-0-

)

(-0-

)

Net accounts receivable

$

2,283,626

$

1,419,281

Accounts receivable are periodically evaluated for
collectability based on past credit history with clients. Provisions for losses
on accounts receivable are determined on the basis of loss experience, known and
inherent risk in the account balance and current economic conditions.

Inventory

Inventory represents raw and blended chemicals and other items
valued at the lower of cost or market with cost determined using the weight
average method which approximates first-in first-out method, and with market
defined as the lower of replacement cost or realizable value.

As of June 30, 2017 and March 31, 2017, inventory consisted of
the following:

June 30,

March 31,

2017

2017

Raw materials

$

578,889

$

587,689

Finished goods

258,422

232,300

Total inventory

$

837,311

$

819,989

Property and Equipment

The Company records all property and equipment at cost less
accumulated depreciation. Improvements are capitalized while repairs and
maintenance costs are expensed as incurred. Depreciation is calculated using the
straight-line method over the estimated useful life of the assets or the lease
term, whichever is shorter. Depreciation periods are as follows for the relevant
fixed assets:

Equipment

5 years

Equipment under capital lease

5 years

Stock-Based Compensation

The Company accounts for stock-based compensation to employees
in accordance with Accounting Standards Codification (ASC) 718. Stock-based
compensation to employees is measured at the grant date, based on the fair value
of the award, and is recognized as expense over the requisite employee service
period. The Company accounts for stock-based compensation to other than
employees in accordance with ASC 505-50. Equity instruments issued to other than
employees are valued at the earlier of a commitment date or upon completion of
the services, based on the fair value of the equity instruments and is
recognized as expense over the service period. The Company estimates the fair
value of stock-based payments using the Black-Scholes option-pricing model for
common stock options and warrants and the closing price of the
Companys common stock for common share issuances.

5

Revenue Recognition

The Company recognizes revenue when all of the following
conditions are satisfied: (1) there is persuasive evidence of an arrangement;
(2) the product or service has been provided to the customer; (3) the amount to
be paid by the customer is fixed or determinable; and (4) the collection of such
amount is probable.

The Company records revenue when it is realizable and earned
upon shipment of the finished products. The Company does not accept returns due
to the nature of the product. However, the Company will provide credit to our
customers for damaged goods.

Fair Value Measurements

The valuation of our embedded derivatives and warrant
derivatives are determined primarily by the multinomial distribution (Lattice)
model. An embedded derivative is a derivative instrument that is embedded within
another contract, which under the convertible note (the host contract) includes
the right to convert the note by the holder, certain default redemption right
premiums and a change of control premium (payable in cash if a fundamental
change occurs). In accordance with ASC 815 Accounting for Derivative
Instruments and Hedging Activities, as amended, these embedded derivatives
are marked-to-market each reporting period, with a corresponding non-cash gain
or loss charged to the current period. A warrant derivative liability is also
determined in accordance with ASC 815. Based on ASC 815, warrants which are
determined to be classified as derivative liabilities are marked-to-market each
reporting period, with a corresponding non-cash gain or loss charged to the
current period. The practical effect of this has been that when our stock price
increases so does our derivative liability resulting in a non-cash loss charge
that reduces our earnings and earnings per share. When our stock price declines,
the Company records a non-cash gain, increasing our earnings and earnings per
share. As such, fair value is a market-based measurement that should be
determined based on assumptions that market participants would use in pricing an
asset or liability. As a basis for considering such assumptions, there exists a
three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value as follows:

Level 1

unadjusted quoted prices in active markets for identical
assets or liabilities that the Company has the ability to access as of the
measurement date.

Level 2

inputs other than quoted prices included within Level 1
that are directly observable for the asset or liability or indirectly
observable through corroboration with observable market data.

Level 3

unobservable inputs for the asset or liability only used
when there is little, if any, market activity for the asset or liability
at the measurement date.

This hierarchy requires the Company to use observable market
data, when available, and to minimize the use of unobservable inputs when
determining fair value.

To determine the fair value of our embedded derivatives,
management evaluates assumptions regarding the probability of certain future
events. Other factors used to determine fair value include our period end stock
price, historical stock volatility, risk free interest rate and derivative term.
The fair value recorded for the derivative liability varies from period to
period. This variability may result in the actual derivative liability for a
period either above or below the estimates recorded on our consolidated
financial statements, resulting in significant fluctuations in other income
(expense) because of the corresponding non-cash gain or loss recorded.

6

Income Taxes

In accordance with ASC 740 Accounting for Income
Taxes, the provision for income taxes is computed using the asset and
liability method. Under the asset and liability method, deferred income tax
assets and liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities and are measured
using the currently enacted tax rates and laws. A valuation allowance is
provided for the amount of deferred tax assets that, based on available
evidence, are not expected to be realized.

Basic and Diluted Loss Per Share

Basic and diluted earnings or loss per share (EPS) amounts in
the consolidated financial statements are computed in accordance ASC 260  10
Earnings per Share, which establishes the requirements for presenting
EPS. Basic EPS is based on the weighted average number of common shares
outstanding. Diluted EPS is based on the weighted average number of common
shares outstanding and dilutive common stock equivalents. Basic EPS is computed
by dividing net income or loss available to common stockholders (numerator) by
the weighted average number of common shares outstanding (denominator) during
the period. Potentially dilutive securities were excluded from the calculation
of diluted loss per share, because their effect would be anti-dilutive.

Newly Issued Accounting Pronouncements

In July 2015, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update No. 2015-11 (ASU 2015-11) "Simplifying the
Measurement of Inventory". According to ASU 2015-11 an entity should measure
inventory within the scope of this update at the lower of cost and net
realizable value. Net realizable value is the estimated selling prices in the
ordinary course of business, less reasonably predictable costs of completion,
disposal, and transportation. Subsequent measurement is unchanged for inventory
measured using LIFO or the retail inventory method. The amendments in ASU
2015-11 more closely align the measurement of inventory in GAAP with the
measurement of inventory in International Financial Reporting Standards (IFRS).
The Board has amended some of the other guidance in Topic 330 to more clearly
articulate the requirements for the measurement and disclosure of inventory.
However, the Board does not intend for those clarifications to result in any
changes in practice. Other than the change in the subsequent measurement
guidance from the lower of cost or market to the lower of cost and net
realizable value for inventory within the scope of ASU 2015-11, there are no
other substantive changes to the guidance on measurement of inventory. For
public business entities, the amendments in ASU 2015-11 are effective for fiscal
years beginning after December 15, 2016, including interim periods within those
fiscal years. For all other entities, the amendments in ASU 2015-11 are
effective for fiscal years beginning after December 15, 2016, and interim
periods within fiscal years beginning after December 15, 2017. The amendments in
ASU 2015-11 should be applied prospectively with earlier application permitted
as of the beginning of an interim or annual reporting period.

The Board decided that the only disclosures required at
transition should be the nature of and reason for the change in accounting
principle. An entity should disclose that information in the first annual period
of adoption and in the interim periods within the first annual period if there
is a measurement-period adjustment during the first annual period in which the
changes are effective.

The Company has evaluated other recent accounting
pronouncements through June 2017 and believes that none of them will have a
material effect on our financial statements.

7

NOTE 2  GOING CONCERN

The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
the recoverability and/or acquisition and sale of assets and the satisfaction of
liabilities in the normal course of business. Since its inception, the Company
has been engaged substantially in financing activities, developing its business
plan and building its initial customer and distribution base for its products.
As a result, the Company incurred accumulated net losses from Inception (June
19, 2012) through the period ended June 30, 2017 of ($25,160,288). In addition,
the Companys development activities since inception have been financially
sustained through debt and equity financing.

The ability of the Company to continue as a going concern is
dependent upon its ability to raise additional capital from the sale of common
stock and, ultimately, the achievement of significant operating revenues. These
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or amounts and
classification of liabilities that might result from this uncertainty.

NOTE 3  PROPERTY AND EQUIPMENT

Fixed assets consisted of the following at:

June 30, 2017

March 31, 2017

Machinery and Equipment

$

1,200,293

$

1,012,000

Machinery under Capital Lease

735,781

735,781

Machinery - Construction in Progress

75,138

185,848

Office Equipment

79,681

79,681

Leasehold Improvements

3,979

3,979

Less: Accumulated Depreciation

(993,420

)

(897,141

)

Fixed Assets, net

$

1,101,452

$

1,120,148

Depreciation expense for the three months ended June 30, 2017
and 2016 was $96,279 and $89,439, respectively.

NOTE 4  REVOLVING FINANCING

On February 1, 2017, The Alkaline Water Company Inc. and its
subsidiaries (the Company) entered into a Credit and Security Agreement (the
Credit Agreement) with SCM Specialty Finance Opportunities Fund, L.P. (the
Lender).

The Credit Agreement provides the Company with a revolving
credit facility (the Revolving Facility), the proceeds of which are to be used
to repay existing indebtedness of the Company, transaction fees incurred in
connection with the Credit Agreement and for working capital needs of the
Company.

Under the terms of the Credit Agreement, the Lender has agreed
to make cash advances to the Company in an aggregate principal at any one time
outstanding not to exceed the lesser of (i) $3 million (the Revolving Loan
Commitment Amount) and (ii) the Borrowing Base (defined to mean, as of any date
of determination, 85% of net eligible billed receivables plus 65% of eligible
unbilled receivables, minus certain reserves).

The Credit Agreement has a term of three years, unless earlier
terminated by the parties in accordance with the terms of the Credit Agreement.

The principal amount of the Revolving Facility outstanding
bears interest at a rate per annum equal to (i) a fluctuating interest rate per
annum equal at all times to the rate of interest announced, from time to time,
within Wells Fargo Bank at its principal office in San Francisco as its prime
rate, plus (ii) 3.25%, payable monthly in arrears.

8

To secure the payment and performance of the obligations under
the Credit Agreement, the Company granted to the Lender a continuing security
interest in all of the Companys assets and agreed to a lockbox account
arrangement in respect of certain eligible receivables.

In connection with the Credit Agreement, the Company paid to
the Lender a $30,000 facility fee. The Company agreed to pay to Lender monthly
an unused line fee in amount equal to 0.083% per month of the difference derived
by subtracting (i) the average daily outstanding balance under the Revolving
Facility during the preceding month, from (ii) the Revolving Loan Commitment
Amount. The unused line fee will be payable monthly in arrears. The Company also
agreed to pay the Lender as additional interest a monthly collateral management
fee equal to 0.35% per month calculated on the basis of the average daily
balance under the Revolving Facility outstanding during the preceding month. The
collateral management fee will be payable monthly in arrears. Upon a termination
of the Revolving Facility, the Company agreed to pay the Lender a termination
fee in an amount equal to 2% of the Revolving Loan Commitment Amount if the
termination occurs before February 1, 2020. The Company must also pay certain
fees in the event that receivables are not properly deposited in the appropriate
lockbox account.

The interest rate will be increased by 5% in the event of a
default under the Credit Agreement. Events of default under the Credit
Agreement, some of which are subject to certain cure periods, include a failure
to pay obligations when due, the making of a material misrepresentation to the
Lender, the rendering of certain judgments or decrees against the Company and
the commencement of a proceeding for the appointment of a receiver, trustee,
liquidator or conservator or filing of a petition seeking reorganization or
liquidation or similar relief.

The Credit Agreement contains customary representations and
warranties and various affirmative and negative covenants including the right of
first refusal to provide financing for the Company and the financial and loan
covenants, such as the loan turnover rate, minimum EBTDA, fixed charge coverage
ratio and minimum liquidity requirements.

NOTE 5  DERIVATIVE LIABILITY

On May 1, 2014, the Company completed the offering and sale of
an aggregate of shares of our common stock and warrants. Each share of common
stock sold in the offering was accompanied by a warrant to purchase one-half of
a share of common stock. The warrants include down-round provisions that reduce
the exercise price of a warrant and convertible instrument. As required by ASC
815 Derivatives and Hedging, if the Company either issues equity shares for a
price that is lower than the exercise price of those instruments or issues new
warrants or convertible instruments that have a lower exercise price, the
investors will be entitled to down-round protection. The Company evaluated
whether its warrants and convertible debt instruments contain provisions that
protect holders from declines in its stock price or otherwise could result in
modification of either the exercise price or the shares to be issued under the
respective warrant agreements. The Company determined that a portion of its
outstanding warrants and conversion instruments contained such provisions
thereby concluding were not indexed to the Companys own stock and therefore a
derivative instrument.

On August 20, 2014, the Company entered into a warrant
amendment agreement with certain holders of the Companys outstanding common
stock purchase warrants whereby the Company agreed to reduce the exercise price
of the Existing Warrants the Holders are to be issued new common stock purchase
warrants of the Company in the form of the Existing Warrants to purchase up to a
number of shares of our common stock equal to the number of Existing Warrants
exercised by the Holders

The Company analyzed the warrants and conversion feature under
ASC 815 Derivatives and Hedging to determine the derivative liability as of
June 30, 2017 was $3,407.

9

NOTE 6  STOCKHOLDERS EQUITY

Preferred Shares

On October 7, 2013, the Company amended its articles of
incorporation to create 100,000,000 shares of preferred stock by filing a
Certificate of Amendment to Articles of Incorporation with the Secretary of
State of Nevada. The preferred stock may be divided into and issued in series,
with such designations, rights, qualifications, preferences, limitations and
terms as fixed and determined by our board of directors. The Series A Preferred
Stock had 10 votes per share (reduced to 0.2 votes per share as a result of the
fifty for one reverse stock split, which became effective as of December 30,
2015) and are not convertible into shares of our common stock.

Grant of Series A Preferred Stock

On October 8, 2013, the Company issued a total of 20,000,000
shares of non-convertible Series A Preferred Stock to Steven Nickolas and
Richard Wright (10,000,000 shares to each), our directors and executive
officers, in consideration for the past services, at a deemed value of $0.001
per share. The company valued these shares based on the cost considering the
time and average billing rate of these individuals and recorded a $20,000 stock
compensation cost for the year ended March 31, 2014.

Our authorized preferred stock was not affected by the reverse
stock split and continues to be 100,000,000 shares of preferred stock, with a
par value of $0.001 per share. In addition, the number of issued and outstanding
shares of Series A Preferred Stock continues to be 20,000,000. However, holders
of Series A Preferred Stock had 0.2 vote per share of Series A Preferred Stock,
instead of 10 votes per share of Series A Preferred Stock, as a result of the
reverse-stock split.

On January 22, 2016, the Company amended the certificate of
designation for our Series A Preferred Stock by filing an amendment to
certificate of designation with the Secretary of State of the State of Nevada.
The Company amended the certificate of designation for our Series A Preferred
Stock by deleting Section 2.2 of the certificate of designation, which
proportionately increases or decreases the number of votes per share of Series A
Preferred Stock in the event of any dividend or other distribution on our common
stock payable in its common stock or a subdivision or consolidation of the
outstanding shares of its common stock. Accordingly, holders of Series A
Preferred Stock will have 10 votes per share of Series A Preferred Stock,
instead of 0.2 votes per share of Series A Preferred Stock.

Grant of Series C Convertible Preferred Stock

On March 30, 2016, the Company designated 3,000,000 shares of
the authorized and unissued preferred stock of our company as Series C
Preferred Stock by filing a Certificate of Designation with the Secretary of
State of the State of Nevada. Each share of the Series C Preferred Stock will be
convertible, without the payment of any additional consideration by the holder
and at the option of the holder, into one fully paid and non-assessable share of
our common stock at any time after (i) the Company achieves consolidated revenue
equal to or greater than $15,000,000 in any 12 month period, ending on the last
day of any quarterly period of our fiscal year; or (ii) a Negotiated Trigger
Event, defined as an event upon which the Series C Preferred Stock will be
convertible as may be agreed by our company and the holder in writing from time
to time.

Effective March 31, 2016, the Company issued a total of
3,000,000 shares of our Series C Preferred Stock to Steven Nickolas and Richard
Wright (1,500,000 shares to each), pursuant to their employment agreements dated
effective March 1, 2016.

Grant of Series D Convertible Preferred Stock

On May 3, 2017, the Company designated 3,000,000 shares of the
authorized and unissued preferred stock of our company as Series D Preferred
Stock by filing a Certificate of Designation with the Secretary of State of the
State of Nevada. Each share of the Series D Preferred Stock will be convertible,
without the payment of any additional consideration by the holder and at the
option of the holder, into one fully paid and non-assessable share of our common
stock at any time after (i) we achieve the consolidated revenue of our company
and all of its subsidiaries equal to or greater than $40,000,000 in any 12 month period,
ending on the last day of any quarterly period of our fiscal year; or (ii) a
Negotiated Trigger Event, defined as an event upon which the Series D Preferred
Stock will be convertible as may be agreed by our company and the holder in
writing from time to time. The company then issued a total of 3,000,000 shares
of our Series D Preferred Stock to our directors, officers, consultants and
employees. We issued these shares relying on the registration exemption provided
for in Section 4(a)(2) of the Securities Act of 1933.

10

Common Stock

The Company is authorized to issue 1,125,000,000 shares of
$0.001 par value common stock. On May 31, 2013, the Company effected a 15-for-1
forward stock split of our $0.001 par value common stock. All shares and per
share amounts have been retroactively restated to reflect such split. Prior to
the acquisition of Alkaline Water Corp., the Company had 109,500,000 shares of
common stock issued and outstanding. On May 31, 2013, the Company issued
43,000,000 shares in exchange for a 100% interest in Alkaline Water Corp. For
accounting purposes, the acquisition of Alkaline Water Corp. by The Alkaline
Water Company Inc. has been recorded as a reverse acquisition of a company and
recapitalization of Alkaline Water Corp. based on the factors demonstrating that
Alkaline Water Corp. represents the accounting acquirer. Consequently, after the
closing of this agreement the Company adopted the business of Alkaline Water
Corp.s wholly-owned subsidiary, Alkaline 88, LLC. As part of the acquisition,
the former management of the Company agreed to cancel 75,000,000 shares of
common stock.

On December 30, 2015, the Company effected a fifty for one
reverse stock split of its authorized and issued and outstanding shares of
common stock. As a result, the authorized common stock has decreased from
1,125,000,000 shares of common stock, with a par value of $0.001 per share, to
22,500,000 shares of common stock, with a par value of $0.001 per share. All
shares and per share amounts have been retroactively restated to reflect such
split.

On January 21, 2016, stockholders of our company approved, by
written consents, an amendment to the articles of incorporation of our company
to increase the number of authorized shares of our common stock from 22,500,000
to 200,000,000.

The Company received written consents representing 20,776,000
votes from the holders of shares of its common stock and our Series A Preferred
Stock voting as a single class, representing approximately 61% of the voting
power of its outstanding common stock and its outstanding Series A Preferred
Stock voting as a single class as of the record date (January 12, 2016). On
January 21, 2016, there were no written consents received by the Company
representing a vote against, abstention or broker non-vote with respect to the
proposal.

Common Stock Issued for Services

Effective April 28, 2017, we issued 610,000 shares of common
stock to six persons, one of whom is a director and officer of our company. Of
these shares, 560,000 are restricted from transfer for a period of two years.

NOTE 7  OPTIONS AND WARRANTS

Stock Option Awards

Effective April 28, 2017, we granted a total of 1,790,000 stock
options to our directors, officers, consultants employees. The stock options are
exercisable at the exercise price of $1.29 per share for a period of six and one-half years from the date of grant. 360,000 of the stock options vest as follows: (i)
120,000 upon the date of grant; and (ii) 120,000 on each anniversary date of
grant. 1,430,000 of the stock options vest as follows: (i) 357,500 upon the date
of grant; and (ii) 357,500 on each anniversary date of grant. We granted the
stock options to 12 U.S. Persons and 3 non U.S. Persons (as that term is defined
in Regulation S of the Securities Act of 1933) and in issuing securities we
relied on the registration exemption provided for in Regulation S and/or Section
4(a)(2) of the Securities Act of 1933.

In June 2017, two option holders elected to exercise their
stock options. A total of 181,000 stock options were surrendered in exchange for
121,288 common stock shares.

11

NOTE 8  RELATED PARTY TRANSACTIONS

On November 18, 2016, our company provided notice to Steven
Nickolas, our CEO and President, of our board of directors finding that there
is just cause for termination of Mr. Nickolass employment and of our
companys intent to terminate the employment of Mr. Nickolas for just cause
pursuant to the provision of the Employment Agreement with Mr. Nickolas dated
March 1, 2016. Under the Employment Agreement, Mr. Nickolas had 30 days to cure
the failures and breaches creating just cause for termination. Mr. Nickolas
failed to cure such failure and breaches and, on April 7, 2017, our company
terminated the employment of Mr. Nickolas for cause. In addition, our company
removed Mr. Nickolas as the President and Chief Executive Officer of our
company.

On April 7, 2017, our board of directors appointed Richard A.
Wright as president of our company. On April 28, 2017, Mr. Wright resigned as
the secretary and treasurer of our company and he was appointed as the chief
executive officer of our company.

On April 28, 2017, our board of directors appointed David
Guarino as chief financial officer, treasurer, secretary president of our
company.

On May 3, 2017, the Company designated 3,000,000 shares of the
authorized and unissued preferred stock of our company as Series D Preferred
Stock by filing a Certificate of Designation with the Secretary of State of the
State of Nevada. Mr. Wright and Mr. Guarino were each issued 1,000,000 shares each of
the Series D Preferred Stock.

NOTE 9  CAPITAL LEASE

On October 22, 2014, the Company entered into a master lease
agreement with Veterans Capital Fund, LLC (the Lessor) for the secured lease
line of credit financing in an amount not to exceed $600,000. The lease is
expected to be secured by three new alkaline generating electrolysis system
machines. Our wholly-owned subsidiary, Alkaline 88, LLC, and Water Engineering
Solutions, LLC acted as co-lessees. Water Engineering Solutions, LLC is an
entity that is controlled and owned by our former President, Chief Executive
Officer, Steven P. Nickolas, and our current President and Chief Executive
Officer, Richard A. Wright. Pursuant to the master lease agreement, the Lessor
agreed to lease to us the equipment described in any equipment schedule signed
by us and approved by the Lessor. It is expected that any lease under the master
lease agreement will be structured for a three year lease term with fixed
monthly lease rental payments based on a monthly lease rate factor of 3.4667% of
the Lessors capital cost. In connection with the entering into the master lease
agreement, the Company also entered into a warrant agreement with the Lessor,
pursuant to which the Company agreed to issue a warrant to purchase 72,000
shares of our common stock to the Lessor and/or its affiliates at an exercise
price of $6. 25 per share for a period of five years, 18,000 shares vested.

On February 25, 2015, the Company amended the master lease
agreement with Veterans Capital Fund, LLC for the increase in the secured lease
line of credit financing to an amount not to exceed $800,000. The lease was
secured by new alkaline generating electrolysis system machines by our
wholly-owned subsidiary, Alkaline 88, LLC, and Water Engineering Solutions, LLC.
Water Engineering Solutions, LLC is an entity that is controlled and owned by
our former President, Chief Executive Officer, Steven P. Nickolas, and our
Vice-President, Secretary, Treasurer and director, Richard A. Wright. Pursuant
to the master lease agreement, the Lessor agreed to lease to us the equipment
described in any equipment schedule signed by us and approved by the Lessor. It
is expected that any lease under the master lease agreement will be structured
for a three year lease term with fixed monthly lease rental payments based on a
monthly lease rate factor of 3.4667% of the Lessors capital cost. In connection
with the entering into the master lease agreement, the Company entered into a
warrant agreement with the Lessor, pursuant to which the Company agreed to
cancel the previous issued warrant for72,000 and issue a warrant to purchase
102,000 shares of our common stock to the Lessor and/or its affiliates at an
exercise price of $5.00 per share for a period of five years. 18,000 shares
vested on October 22, 2014, 13,316 shares on October 28, 2014, 13,606 shares on
December 22, 2014, 6,945 shares on February 3, 2015 and 15,799 shares on March
5, 2015. The remaining 18,105 shares will vest on a pro rata basis according to
any mounts the Lessor funds pursuant to any lease schedules under the master
lease agreement, provided that if the Company draws on 90% or more of the total
lease line under the master lease agreement, then all such shares will be deemed
to be vested. The Company recorded the bifurcated value of $309,028 of the
warrants issued as additional paid in capital, the value was determine using a
Black-Scholes, a level 3 valuation measure.

12

During the year ended March 31, 2015 the Company agreed to
lease the specialized equipment used to make our alkaline water with a value of
$735,781 under the above Master Lease agreement. The Company evaluated this
lease under ASC 840-30 Leases- Capital Leases and concluded that these lease
where a capital asset.

NOTE 10  NOTES PAYABLE

On September 20, 2016, we entered into a loan facility
agreement (the Loan Agreement) with Turnstone Capital Inc. (the Lender),
whereby the Lender agreed to make available to our company a loan in the
aggregate principal amount of $1,500,000 (the Loan Amount). Pursuant to the
Loan Agreement, the Lender agreed to make one or more advances of the Loan
Amount to our company as requested from time to time by our company in an amount
to be agreed upon by our company and the Lender (each, an Advance).

During the year ended March 31, 2017, the lender made advances
totaling $1,000,000. This amount together with accrued interest of $30,000 was
converted to 1,030,000 common shares on March 31, 2017.

In June, 2017, Turnstone advanced the remaining $500,000
available under the Loan Agreement. The Company evaluated this transaction under
ASC 470-20-30 Debt  liability and equity component and determined that a
Debt Discount of $295,000 was provided and will be amortized over the remaining
term of the Loan Agreement.

NOTE 11  SUBSEQUENT EVENTS

On August 17, 2017, we issued 1,500,000 shares of our common
stock to Steven P. Nickolas upon conversion of 1,500,000 shares of our Series C
Preferred Stock held by Mr. Nickolas. The shares of our Series C Preferred Stock
became convertible into shares of our common stock without the payment of any
additional consideration by Mr. Nickolas and at the option of Mr. Nickolas
because the termination of the employment agreement between our company and Mr.
Nickolas was an event constituting a Negotiated Trigger Event as defined in
the Certificate of Designation for our Series C Preferred Stock.

In consideration for services rendered and to be rendered to
our company pursuant to a services agreement dated July 26, 2016, we intend to
issue a consultant 262,596 shares of our common stock.

13

Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations.

Forward-Looking Statements

This report contains forward-looking statements. All
statements other than statements of historical fact are forward-looking
statements for purposes of federal and state securities laws, including, but
not limited to, any projections of earnings, revenue or other financial items;
any statements of the plans, strategies and objections of management for future
operations; any statements concerning proposed new services or developments; any
statements regarding future economic conditions or performance; any statements
or belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words may,
could, estimate, intend, continue, believe, expect or anticipate
or other similar words. These forward-looking statements present our estimates
and assumptions only as of the date of this report. Accordingly, readers are
cautioned not to place undue reliance on forward-looking statements, which speak
only as of the dates on which they are made. Except as required by applicable
law, including the securities laws of the United States, we do not intend, and
undertake no obligation, to update any forward-looking statement.

Although we believe the expectations reflected in any of our
forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed in any of our forward-looking
statements. Our future financial condition and results of operations, as well as
any forward-looking statements, are subject to change and inherent risks and
uncertainties. The factors impacting these risks and uncertainties include, but
are not limited to:

our current lack of working capital;

inability to raise additional financing;

the fact that our accounting policies and methods are fundamental to how we
report our financial condition and results of operations, and they may require
our management to make estimates about matters that are inherently uncertain;

deterioration in general or regional economic conditions;

adverse state or federal legislation or regulation that increases the costs
of compliance, or adverse findings by a regulator with respect to existing
operations;

inability to efficiently manage our operations;

inability to achieve future sales levels or other operating results; and

the unavailability of funds for capital expenditures.

As used in this quarterly report on Form 10-Q, the terms we,
us our, the Company and Alkaline refer to The Alkaline Water Company
Inc., a Nevada corporation, and its wholly-owned subsidiary, Alkaline Water
Corp., and Alkaline Water Corp.s wholly-owned subsidiary, Alkaline 88, LLC,
unless otherwise specified.

Results of Operations

Our results of operations for the three months ended June 30,
2017 and June 30, 2016 are as follows:

14

For the three

For the three

months ended

months ended

June 30,

June 30,

2017

2016

Revenue

$

5,180,194

$

2,946,749

Cost of goods sold

2,951,944

1,790,713

Gross profit

2,228,250

1,156,036

Net Loss (after operating expenses and other expenses)

$

(1,771,754

)

$

(1,013,631

)

Revenue and Cost of Goods Sold

We had revenue from sales of our product for the three months
ended June 30, 2017 of $5,180,194, as compared to $2,946,749 for the three
months ended June 30, 2016, an increase of 76% generated by sales of our
alkaline water. The increase in sales is due to the expanded distribution of our
products to additional retailers throughout the country. As of June 30, 2017,
the product is now available in all 50 states at an estimated 31,000 retail
locations. As of June 30, 2016, the product was available in all 50 states at an
estimated 25,000 retail locations. This increase has occurred primarily through
the addition of 45 of the top national grocery retailers as customer during the
year ended March 31, 2017. We distribute our product through several channels.
We sell through large national distributors (UNFI, KeHe, C&S, and
Core-Mark), which together represent over 150,000 retail outlets. We also sell
our product directly to retail clients, including convenience stores, natural
food products stores, large ethnic markets and national retailers. Some examples
of retail clients are, Albertsons, Safeway, Kroger, Schnucks, Smart &
Final, Jewel-Osco, Sprouts, Bashas, Stater Bros. Markets, Unified Grocers,
Bristol Farms, Vallarta, Superior Foods, Ingles, HEB Brookshires, Publix,
Shaws, Raleys, Food Lion, Harris Teeter, and Festival Foods.

Cost of goods sold is comprised of production costs, shipping
and handling costs. For the three months ended June 30, 2017, we had cost of
goods sold of $2,951,944, or 57% of revenue, as compared to cost of goods sold
of $1,790,713 or 60.8% of revenue, for the three months ended June 30, 2016. The
increase in gross profit rate is a result of reduced raw material cost through
greater volume purchases from our suppliers.

Expenses

Our operating expenses for the three months ended June 30, 2017
and June 30, 2016 are as follows:

For the three

For the three

months ended

months ended

June 30,

June 30,

2017

2016

Sales and marketing expenses

$

1,670,017

$

1,085,999

General and administrative expenses

2,090,392

840,774

Depreciation expenses

96,279

89,439

Total operating expenses

$

3,856,688

$

2,016,212

During the for the three months ended June 30, 2017, our total
operating expenses were $3,856,688, as compared to $2,016,212 for the three
months ended June 30, 2016.

For the three months ended June 30, 2017, the total included
$1,670,017 of sales and marketing expenses and $2,090,392 of general and
administrative expenses, consisting primarily of approximately $1,339,502 of
stock and stock option compensation expense, and $299,347 of professional fees.
Our stock and stock option compensation expense was incurred as a part of our
issuance of certain stock options and stock grants to employees and key
consultants to develop our business. Although a non-cash expense, the value of
such issuances had a material impact on our general and administrative expenses
for the three months ended June 30, 2017.

15

For the three months ended June 30, 2016 the total included
$1,085,999 of sales and marketing expenses and $840,774 of general and
administrative expenses, consisting primarily of approximately $142,625 of stock
option compensation expense, and $279,763 of professional fees. Our stock and
stock option compensation expense was incurred as a part of our issuance of
certain stock options and stock grants to employees and key consultants to
develop our business. Although a non-cash expense, the value of such issuances
had a material impact on our general and administrative expenses for the three
months ended June 30, 2016.

Liquidity and Capital Resources

Working Capital

June 30, 2017

March 31, 2017

Current assets

$

3,847,849

$

3,150,321

Current liabilities

4,028,860

3,429,437

Working capital (deficiency)

$

(181,011

)

$

(279,116

)

Current Assets

Current assets as of June 30, 2017 and March 31, 2017 primarily
relate to $441,827 and $603,805 in cash, $2,283,626 and $1,419,281 in accounts
receivable and $837,311 and $819,989 in inventory, respectively.

Current Liabilities

Current liabilities as of June 30, 2017 and March 31, 2017
primarily relate to $1,355,146 and $1,343,824 in accounts payable, revolving
financing of $2,064,956 and $1,436,083, current portion of capital leases of
$156,829 and $190,207 and accrued expenses of $448,522 and $455,916,
respectively.

Cash Flow

Our cash flows for the three months ended June 30, 2017 and
June 30, 2016 are as follows:

For the three

For the three

monthsended

months ended

June 30,

June 30,

2017

2016

Net Cash used in operating activities

$

(1,146,132

)

$

(993,779

)

Net Cash used in investing activities

(77,583

)

(116,929

)

Net Cash provided by financing activities

1,061,737

356,309

Net increase in cash and cash equivalents

$

(161,978

)

$

(754,399

)

Operating Activities

Net cash used in operating activities was $1,146,132 for the
three months ended June 30, 2017, as compared to $993,779 used in operating
activities for the three months ended June 30, 2016. The increase in net cash
used in operating activities was primarily due to increase in accounts receivable
in the quarter ended June 30, 2017 compared to an increase of accounts payable
in the quarter ended June 30, 2016.

Investing Activities

Net cash used in investing activities was $77,583 for the three
months ended June 30, 2017, as compared to $116,929 used in investing activities
for the three months ended June 30, 2016. The decrease in net cash used by
investing activities was the result of a decrease of purchase of fixed assets
and equipment deposits.

16

Financing Activities

Net cash provided by financing activities for the three months
ended June 30, 2017 was $1,061,737, as compared to $356,309 for the three months
ended June 30, 2016. The increase of net cash provided by financing activities
is attributable to borrowings on the loan facility agreement with Turnstone
Capital Inc. and the credit facility with SCM Specialty Finance Opportunities
Fund, L.P.

Cash Requirements

We believe that cash flow from operations will not meet our
present and near-term cash needs and thus we will require additional cash
resources, including the sale of equity or debt securities, to meet our planned
capital expenditures and working capital requirements for the next 12 months. We
estimate that our capital needs over the next 12 months will be up to
$3,000,000. We will require additional cash resources to, among other things,
expand broker network, increase manufacturing capacity, expand retail
distribution and add support staff. If our own financial resources and future
cash-flows from operations are insufficient to satisfy our capital requirements,
we may seek to sell additional equity or debt securities or obtain additional
credit facilities. The sale of additional equity securities will result in
dilution to our stockholders. The incurrence of indebtedness will result in
increased debt service obligations and could require us to agree to operating
and financial covenants that could restrict our operations or modify our plans
to grow the business. Financing may not be available in amounts or on terms
acceptable to us, if at all. Any failure by us to raise additional funds on
terms favorable to us, or at all, will limit our ability to expand our business
operations and could harm our overall business prospects.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to our
stockholders.

Item 3. Quantitative and Qualitative Disclosures About
Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as that term
is defined in Rule 13a-15(e), promulgated by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934. Disclosure controls
and procedures include controls and procedures designed to ensure that
information required to be disclosed in our company's reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, and that such information is accumulated and communicated to
our management, including our principal executive officer and our principal
financial officer to allow timely decisions regarding required disclosure.

As required by paragraph (b) of Rules 13a-15 under the
Securities Exchange Act of 1934, our management, with the participation of our
principal executive officer and our principal financial officer, evaluated our
company's disclosure controls and procedures as of the end of the period covered
by this quarterly report on Form 10-Q. Based on this evaluation, our management
concluded that as of the end of the period covered by this quarterly report on
Form 10-Q, our disclosure controls and procedures were effective.

17

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial
reporting during the fiscal quarter ended June 30, 2017 that have materially
affected, or are reasonably likely to materially affect our internal control
over financial reporting.

PART IIOTHER INFORMATION

Item 1. Legal Proceedings.

The Company is a defendant in a lawsuit filed on April 6, 2017
by Water Engineering Solutions, Inc. (WES), in the Maricopa County, Arizona,
Superior Court, Water Engineering Solutions, Inc. v. The Alkaline Water
Company, Inc., et al., cause number CV2017-005487. WES seeks damages arising
out of the alleged breach of a written manufacturing agreement between the
Company and WES. WES alleges that the Company has failed to purchase equipment
from WES as required under the manufacturing agreement. The Company denies the
allegations of the claims, and has moved to dismiss pursuant to the terms of the
agreement which require that all disputes be resolved by arbitration. In
response, WES filed an amended complaint apparently abandoning its breach of
contract claim, and instead seeking damages for alleged misappropriation of
claimed trade secrets relating to the equipment which the Company purchased
under the manufacturing agreement. The Company intends to renew its motion to
dismiss based on the arbitration provisions of that agreement. The Company
intends to defend the claim vigorously, whether in court or in arbitration
proceedings.

The Company is a defendant in a lawsuit filed on April 11, 2017
by Steven Nickolas, the former Chief Executive Officer of the Company, in the
Maricopa County, Arizona, Superior Court, Nickolas v. The Alkaline Water
Company, Inc., et al., cause number CV2017-053064. Mr. Nickolas seeks damages
arising out of the alleged breach of a written employment agreement between the
Company and Mr. Nickolas. Mr. Nickolas alleges that the Company wrongfully
terminated the employment agreement and has failed to pay wages due under the
employment agreement. The Company denies the allegations of the claims, and has
counterclaimed against Mr. Nickolas for damages suffered by the Company as a
result of numerous breaches of fiduciary duty owed to the Company by Mr.
Nickolas in his capacity as officer and director of the company, including
diversion of corporate assets to personal matters, and actively interfering with
the Companys suppliers and customers. The Company intends to defend against Mr.
Nickolass claims vigorously and to pursue its counterclaims.

The Company is nominal defendant in a lawsuit filed on April 6,
2017 by Steven Nickolas, a shareholder of the Company, derivatively on behalf of
the Company, against Richard Wright, David Guarino, and Aaron Keay (current
directors of the Company), and Daniel Lorey (current employee of the Company)
and the Companys former accounting firm, Seale & Beers, LLC. The lawsuit is
pending in the Maricopa County, Arizona, Superior Court, Steven Nickolas,
derivatively on behalf of the Alkaline Water Company, v. Richard Wright, et al.
cause number CV2017-005488 (the Derivative Action). Mr. Nickolas alleges a
range of conduct breaching fiduciary and general duties owed to the Company.
Some of these allegations were first raised by Mr. Nickolas in August, 2016 and,
at that time, the Company appointed an independent director, Mr. Keay, to
conduct an investigation of the allegations. Mr. Keay conducted the
investigation and concluded that the claims were without merit. Though the
Company is a nominal defendant in this action, the Company believes the claims
in the action are baseless and has denied the claims. The Company anticipates
that the other defendants will defend the action vigorously, and is paying the
cost of defending against the claims, subject to a reservation of rights in the
event of a finding the principal defendants breached duties owed to the Company
and are not eligible for indemnification.

Steven Nickolas also filed virtually an identical lawsuit to
the Derivative Action in his individual capacity against Richard Wright, David
Guarino, and Dan Lorey. The lawsuit was filed on April 6, 2017 and is pending in
the Maricopa County, Arizona, Superior Court, Steven Nickolas vs. Richard
Wright et al. cause number CV2017-005486 (the Individual Action). The
allegations in the Individual Action are nearly identical to those in the
Derivative Action. The Company anticipates that the defendants will defend the
action vigorously, and is paying the cost of defending against the claims,
subject to a reservation of rights in the event of a finding the principal
defendants breached duties owed to the Company and are not eligible for
indemnification.

18

The Company is a defendant in a lawsuit filed on June 1, 2017
by Black Mountain Equities, Inc. (BM) in the San Diego County, California,
Superior Court, Black Mountain Equities, Inc. v. The Alkaline Water Company,
Inc., et al., cause number 37-2017-00019820-CU-BT-CTL. BM is seeking damages of
$151,000 for intentional interference with contractual relations arising from
the Company attempting to put a stop on the transfer of certain stock in the
Company from a third party to the Plaintiff. The Company intends to defend the
claim vigorously.

The Company is a defendant in a lawsuit filed on August 9, 2017
by Steven Nickolas, a shareholder of the Company. The lawsuit is pending in the
Maricopa County, Arizona, Superior Court, Nickolas v. The Alkaline Water
Company, Inc., et al., cause number CV2017-007786. Mr. Nickolas seeks
declaratory relief, monetary damages, specific performance and injunctive relief
arising from the alleged failure of the Company to allow him to convert his
Series C Preferred Stock of the Company to common stock of the Company. The
Company intends to defend these claims vigorously.

Except as detailed above, we know of no material pending legal
proceedings to which our company or any of our subsidiaries is a party or of
which any of our properties, or the properties of any of our subsidiaries, is
the subject. In addition, we do not know of any such proceedings contemplated by
any governmental authorities.

Except as detailed above, we know of no material proceedings in
which any of our directors, officers or affiliates, or any registered or
beneficial stockholder is a party adverse to our company or any of our
subsidiaries or has a material interest adverse to our company or any of our
subsidiaries.

Item 1A. Risk Factors.

Information regarding risk factors appears in our Annual Report
on Form 10-K filed on July 14, 2017. There have been no material changes since
July 14, 2017 from the risk factors disclosed in that Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.

On August 17, 2017, we issued 1,500,000 shares of our common
stock to Steven P. Nickolas upon conversion of 1,500,000 shares of our Series C
Preferred Stock held by Mr. Nickolas. The shares of our Series C Preferred Stock
became convertible into shares of our common stock without the payment of any
additional consideration by Mr. Nickolas and at the option of Mr. Nickolas
because the termination of the employment agreement between our company and Mr.
Nickolas was an event constituting a Negotiated Trigger Event as defined in
the Certificate of Designation for our Series C Preferred Stock. We issued these
shares relying on the registration exemption provided for in Section 4(a)(2) of
the Securities Act of 1933.

In consideration for services rendered and to be rendered to
our company pursuant to a services agreement dated July 26, 2016, we intend to
issue a consultant 262,596 shares of our common stock. We intend to issue these
shares relying on the registration exemption provided for in Section 4(a)(2) of
the Securities Act of 1933.

Share Exchange Agreement dated May 31, 2013 with Alkaline
Water Corp. and its shareholders (incorporated by reference from our
Current Report on Form 8-K, filed on June 5, 2013)

(3)

Articles of Incorporation and Bylaws

3.1

Articles of Incorporation (incorporated by reference from
our Form S-1 Registration Statement, filed on October 28, 2011)

3.2

Certificate of Change (incorporated by reference from our
Quarterly Report on Form 10-Q, filed on August 13, 2013)

3.3

Articles of Merger (incorporated by reference from our
Quarterly Report on Form 10-Q, filed on August 13, 2013)

3.4

Certificate of Amendment to Articles of Incorporation
(incorporated by reference from our Current Report on Form 8-K, filed on
October 11, 2013)

3.5

Certificate of Designation (incorporated by reference
from our Current Report on Form 8-K, filed on October 11, 2013)

3.6

Certificate of Designation (incorporated by reference
from our Current Report on Form 8-K, filed on November 12, 2013)

3.7

Certificate of Change (incorporated by reference from our
Current Report on Form 8-K, filed on December 30, 2015)

3.8

Certificate of Amendment to Articles of Incorporation
(incorporated by reference from our Current Report on Form 8-K, filed on
January 25, 2016)

3.9

Certificate of Amendment to Certificate of Designation
(incorporated by reference from our Current Report on Form 8-K, filed on
January 25, 2016)

3.10

Certificate of Designation (incorporated by reference
from our Current Report on Form 8-K, filed on April 5, 2016)

3.11

Certificate of Withdrawal of Certificate of Designation
(incorporated by reference from our Current Report on Form 8-K, filed on
April 4, 2017)

3.12

Certificate of Designation (incorporated by reference
from our Current Report on Form 8-K, filed on May 4, 2017)

3.13

Amended and Restated Bylaws (incorporated by reference
from our Current Report on Form 8- K, filed on March 15, 2013)

(10)

Material Contracts

10.1

Contract Packer Agreement dated November 14, 2012 between
Alkaline 84, LLC and AZ Bottled Water, LLC (incorporated by reference from
our Current Report on Form 8-K, filed on June 5, 2013)

10.2

Stock Option Agreement dated October 9, 2013 with Steven
P. Nickolas (incorporated by reference from our Quarterly Report on Form
10-Q, filed on November 13, 2013)

10.3

Stock Option Agreement dated October 9, 2013 with Richard
A. Wright (incorporated by reference from our Quarterly Report on Form
10-Q, filed on November 13, 2013)

10.4

Contract Packer Agreement dated October 7, 2013 with
White Water, LLC (incorporated by reference from our Quarterly Report on
Form 10-Q, filed on November 13, 2013)

10.5

Manufacturing Agreement dated August 15, 2013 with Water
Engineering Solutions, LLC (incorporated by reference from our
Registration Statement on Form S-1, filed on November 27, 2013)

10.6

Equipment Lease Agreement dated January 17, 2014
(incorporated by reference from our Current Report on Form 8-K, filed on
January 27, 2014)

10.7

Revolving Accounts Receivable Funding Agreement dated
February 20, 2014 (incorporated by reference from our Current Report on
Form 8-K, filed on February 25, 2014)

20

Exhibit Number

Description

10.8

Form of Securities Purchase Agreement dated as of April
28, 2014, between The Alkaline Water Company Inc. and the purchasers named
therein (incorporated by reference from our Current Report on Form 8-K,
filed on May 6, 2014)

10.9

Form of Common Stock Purchase Warrant (incorporated by
reference from our Current Report on Form 8-K, filed on May 6, 2014)

10.10

Form of Placement Agent Common Stock Purchase Warrant
(incorporated by reference from our Current Report on Form 8-K, filed on
May 6, 2014)

10.11

Stock Option Agreement dated May 12, 2014 with Steven P.
Nickolas (incorporated by reference from our Current Report on Form 8-K,
filed on May 14, 2014)

10.12

Stock Option Agreement dated May 12, 2014 with Richard A.
Wright (incorporated by reference from our Current Report on Form 8-K,
filed on May 14, 2014)

10.13

Stock Option Agreement dated May 21, 2014 with Steven P.
Nickolas (incorporated by reference from our Current Report on Form 8-K,
filed on May 23, 2014)

10.14

Stock Option Agreement dated May 21, 2014 with Richard A.
Wright (incorporated by reference from our Current Report on Form 8-K,
filed on May 23, 2014)

10.15

Amendment #1 dated February 12, 2014 to Equipment Lease
Agreement (incorporated by reference from our Quarterly Report on Form
10-Q, filed on August 13, 2014)

10.16

Equipment Sale/Lease Back Agreement dated April 2, 2014
(incorporated by reference from our Quarterly Report on Form 10-Q, filed
on August 13, 2014)

10.17

Agreement dated August 12, 2014 with H.C. Wainwright
& Co., LLC (incorporated by reference from our Current Report on Form
8-K, filed on August 21, 2014)

10.18

Form of Warrant Amendment Agreement (incorporated by
reference from our Current Report on Form 8-K, filed on August 21, 2014)

10.19

Form of Common Stock Purchase Warrant (incorporated by
reference from our Current Report on Form 8-K, filed on August 21, 2014)

10.20

Form of Warrant Amendment Agreement (incorporated by
reference from our Current Report on Form 8-K, filed on October 9, 2014)

10.21

Form of Common Stock Purchase Warrant (incorporated by
reference from our Current Report on Form 8-K, filed on October 9, 2014)

10.22

Master Lease Agreement dated October 28, 2014 with
Veterans Capital Fund, LLC (incorporated by reference from our Current
Report on Form 8-K, filed on November 4, 2014)

10.23

Warrant Agreement dated October 28, 2014 with Veterans
Capital Fund, LLC (incorporated by reference from our Current Report on
Form 8-K, filed on November 4, 2014)

10.24

Registration Rights Agreement dated October 28, 2014 with
Veterans Capital Fund, LLC (incorporated by reference from our Current
Report on Form 8-K, filed on November 4, 2014)

10.25

2013 Equity Incentive Plan (incorporated by reference
from our Current Report on Form 8-K, filed on November 4, 2014)

10.26

Form of Amending Agreement to Stock Option Agreement
(incorporated by reference from our Current Report on Form 8-K, filed on
November 4, 2014)

10.27

Stock Option Agreement dated February 18, 2016 with
Steven P. Nickolas (incorporated by reference from our Current Report on
Form 8-K, filed on April 14, 2016)

10.28

Stock Option Agreement dated February 18, 2016 with
Richard A. Wright (incorporated by reference from our Current Report on
Form 8-K, filed on April 14, 2016)

10.29

Securities Purchase Agreement dated as of May 11, 2015
with Assurance Funding Solutions LLC (incorporated by reference from our
Annual Report on Form 10-K, filed on July 14, 2015)

10.30

Secured Term Note dated May 2015 issued to Assurance
Funding Solutions LLC (incorporated by reference from our Annual Report on
Form 10-K, filed on July 14, 2015)

10.31

General Security Agreement dated as of May 11, 2015 with
Assurance Funding Solutions LLC (incorporated by reference from our Annual
Report on Form 10-K, filed on July 14, 2015)